Apple set to announce likely its best quarter ever on January 24 - Page 2

The problem is these idiot sleazbag "Analysts". They keep "bumping up" iPhone estimates. From 25M, to 28M, to 31M, now I just heard some say they expect "35M". These greasy manipulators just play games with the Stock, as they know that it paralyses the Stock when Earnings gets announced. I.e, AAPL would have to report 40M iPhones to actually "blowout", which is ludicrous.

Every time you hear a "bump up in estimates", it might be priced into the Stock like .50c on a trading day, i.e insignificant. However, it's already psychologically embedded in the Investors heads, so they now have the belief that this is already all priced into the Stock, running into Earnings. Sleazy manipulation at its best.

One can only wish that our Government would put more regulation on Wall Street and its shady characters, but said characters pay our Politicians bills.

If institutional investors buy up at least 70% of a stock how is the price set.

It just seems so odd that a company like Amazon can command an astronomical p/e ratio while a company like Apple sees its p/e ratio compressed more and more.

It confounds me as to where these share prices originate.

This answer is going to sound simplistic, but it's true: the markets set the price -- seller and buyers, whether they are large institutions or individuals. The mechanisms of the stock markets make constant adjustments depending on matching buyers to sellers. If at any given moment there are more sellers than buyers for a given stock, then the stock price drops until more buyers come in and the number is equalized. And vice-versa.

Obviously the institutions have a lot more influence on stock prices than us lowly individual investors because they have a lot more shares to buy and sell. That is why I always say that we are along for the ride.

Don't look for logic in stock pricing, and not especially over the short term. Valuations are based on guesses about the future, and those guesses are bound to vary widely. Everybody wants to be the first through the door, whether they're getting in or out.

This answer is going to sound simplistic, but it's true: the markets set the price -- seller and buyers, whether they are large institutions or individuals. The mechanisms of the stock markets make constant adjustments depending on matching buyers to sellers. If at any given moment there are more sellers than buyers for a given stock, then the stock price drops until more buyers come in and the number is equalized. And vice-versa.

Obviously the institutions have a lot more influence on stock prices than us lowly individual investors because they have a lot more shares to buy and sell. That is why I always say that we are along for the ride.

Don't look for logic in stock pricing, and not especially over the short term. Valuations are based on guesses about the future, and those guesses are bound to vary widely. Everybody wants to be the first through the door, whether they're getting in or out.

If I was to try and put logic to it then I'd have to guess that investors feel more comfortable with Amazon's business model of selling a lot of items from many different brands compared to Apple's model of selling a few select items all stamped with one brand.

In the stock world I guess you could compare it to buying small amounts of many many different companies in different sectors rather than putting your money into only 5 or 6 companies from one sector.

... but a forward p/e of 89.25 for Amazon compared to 10.77 for Apple... wow, guys... too much faith and not enough faith imo...

If I was to try and put logic to it then I'd have to guess that investors feel more comfortable with Amazon's business model of selling a lot of items from many different brands compared to Apple's model of selling a few select items all stamped with one brand.

In the stock world I guess you could compare it to buying small amounts of many many different companies in different sectors rather than putting your money into only 5 or 6 companies from one sector.

... but a forward p/e of 89.25 for Amazon compared to 10.77 for Apple... wow, guys... too much faith and not enough faith imo...

That's all I've got...

It's really all about the anticipation of earnings growth. The markets have been saying for some time (in effect) that Apple's growth spurt is coming to an end and that Amazon's is just about to begin. This has been going on for an illogically long time IMO but the market doesn't seem to care about my opinion.

I realized that if growth declined they wouldn't raise the p/e... but I just had to add that as one scenario, even if it only had a snowball's chance in hell.

I too think the p/e would decline [and be compressed even more].

One thing that I always wonder... How is price set? Apple and Amazon are good examples of how wonky prices seem to be.

If 70% of Apple stock is held by institutions and 67.50% of Amazon stock is held by institutions then who or how is the price set?

Ok, Milmossy is on my blocked list now. Fretful guy.

Do you all think that *possibly* during a bad recession/s, when the markets are crazy, that the hedge funds USE a reliable company like AAPL to generate their own earnings every quarter? I do. I think they have a heavy lid on the stock, simply so they can lift it when they need to and clamp it back down for the next cycle. What other company could a hedge fund work like they work Apple? Hmm? They bet on both the up and down side so they can't lose.

As another poster has pointed out, you also have funds which must dump their valuable stocks just to make the quarterly earnings statement look better to their clients.

There's also culture. Wall Street does not understand Apple's business theory, and there seems to be little PR from Apple to help these analyst types. Frankly I don't blame them, but it would be better if they communicated a little more. It would also help if the US SEC took a look at this stock. I mean we've all seen it, Apple is in a class unto its own.

I'm really hoping for a split, that would presumably be neutral to the stock but generate some positive excitement. We need more individuals holding the stock.

Apple's price seems to be in an excruciating doldrums again, but eventually it will break out and reset at a new higher doldrums. They can't compress the p/e to zero!!!! That's where it's headed unless it makes a BIG move up in price this quarter. If they have anything like the sales we see hinted at, the stock will need to be a lot higher in price just to maintain the current undervalued p/e. I expect this quarter will be the reset to the new higher level.

Can you imagine the analysts valuing the Apple solely on the amount of cash they have in the bank? Yeah, that would be a p/e of zero. Rediculous.

Amazon still skates on thin ice but not for long. They will soon demonstrate why Shorting a stock is sometimes done for a valid reason.

What is really factored into the price is a kind of perpetual sense of disbelief that any company could be as good as Apple is. ~Retrogusto

Isn't it funny that AMZN and AAPL run almost parallel to each other over the last 5 years (s/p growth percentage) and no other major even comes close to them.

[AMZN's p/e has steadily inflated over 5 years while AAPL's p/e has steadily compressed... weird]

Yeah really. It's almost like the big controlling firms don't give a fig about Amazon, it's in a state of free rise, soon to be in a state of free fall. It's a 'cult' stock so they say. I take that to mean its one the public and run of the mill brokers like a lot, no matter what. The big hedge funds will short them out brutally when it suits them to. A p/e of 100 ! Really.

It almost seems like Apple tries to rise and rise but it's the frickin 3rd week of the month when options expire and somebody presses a button and the stock tanks. Or there's a rumor or some other stupid reason. My god I wish Apple tried to comment on this. Maybe there's no way other than sheer profit, which makes them all the more bankable for manipulation. Arrrgh. Zaky had a piece somewhere saying that if Apple had a growth stock p/e or in the 50s it would be way over 1,000 a share or did he say 4,00 I forget. If Apple had a p/e of 50 what would the stock price be right now, somebody do the math. Let's see, 418/q4 earnings...

What is really factored into the price is a kind of perpetual sense of disbelief that any company could be as good as Apple is. ~Retrogusto

AMZN indeed seems to be like a cult stock. If you read comment sections within Articles that state even negative news on the company, people have an odd enthusiasm. I can only wish AAPL had the same Investors! I see AMZN as a "trap" right now. Already it has been falling and falling since hitting its highs a few months ago, however, there is just so, sooo, sooooo, soooooooo much room for it to fall. We got a taste after its last weak Earnings Call, however, even that wasn't as tragic as AAPL's would have been had they reported anything near as underwhelming. Not to mention, AMZN's hottest product is losing money on every sale, and they have warned of even possibly losing money during the next few or so Quarters....

.... And the P/E is around 100, why?!?! Somebody put some cheese on a string and throw it AMZN's way. Reel it in as they come sniffing. We can use them.

AMZN indeed seems to be like a cult stock. If you read comment sections within Articles that state even negative news on the company, people have an odd enthusiasm. I can only wish AAPL had the same Investors! I see AMZN as a "trap" right now. Already it has been falling and falling since hitting its highs a few months ago, however, there is just so, sooo, sooooo, soooooooo much room for it to fall. We got a taste after its last weak Earnings Call, however, even that wasn't as tragic as AAPL's would have been had they reported anything near as underwhelming. Not to mention, AMZN's hottest product is losing money on every sale, and they have warned of even possibly losing money during the next few or so Quarters....

.... And the P/E is around 100, why?!?! Somebody put some cheese on a string and throw it AMZN's way. Reel it in as they come sniffing. We can use them.

... and yet I just read an investment firm's pronouncements for 2012 on some internet stocks.

I'll just do what I know works best, use my OWN mind to invest. I've been hella right so far. I used to trade occasionally, but have had to give it up, tho not for losing money. I know, it IS scary, but Apple is fairly easy to trade on the more obvious swings. Like when you mentioned 370 or so. I thought that was a good time to buy too. There's still room at 418 ! I would hazard a guess it will hit 445 after earnings announcement then fall back to 420s, followed by an inexorable rise to 500 within 6 months.* There. My prediction FWIW. This could be a fun game, but not as fun as trying to guess what the hell Apple will invent next, that's my favorite part of this site.
*(barring global catastrophe of course).

What is really factored into the price is a kind of perpetual sense of disbelief that any company could be as good as Apple is. ~Retrogusto

That's another problem with Analysts, and how they can crush the casual Investor who doesn't do their own due diligence. Many of them can't separate a good company/good stock from a good company with a good stock *that has already peaked and is too expensive*. There's no rationale to take AMZN (back) to $240, especially now that they've said they might actually *lose* money in the coming Quarters? Can you imagine if Apple said that? Lol.

These guys need to use their heads and realize that a good piece of meat sometimes has to be left alone if it's been sitting out for too long. Such is the case with AMZN. Good company: Yes. Good growth ahead: Most probably. Good Stock to own: Yes. Good Stock to buy at these levels: Hell no. Already valued way above any rationale expectation the company can fulfill within the coming decade? Most probably. Good Stock, but a terrible Buy, as it is fundamentally overvalued in a major way.

I remembered in the past you saying you felt that the lower PE reduced the downside risk factor.

What PE expresses is investor sentiment, the premium they are willing to pay for future growth potential. For reasons that elude me, investors are expecting massive growth rates out of AMZN. With a PEG of nearly 6 they aren't getting them, but the expectations continue. For comparison, the PEG for AAPL is 0.6, so in this case investors are getting growth but not expecting it. Looking for logic there? Good luck.

What we might be forgetting here is our old friend momentum. Markets can drive stocks higher or lower for no other good reason than they are already moving in that direction. The herd effect is a powerful one. I suspect a comeuppance is due for AMZN but I would not hazard a guess as to when.

Well, yes, I do believe it reduces the risk factor. But for Apple that could be a P/E of 20 or even 22. But then, the markets decide this for us. My thoughts are that at this point, as long as Apple outpaces the market, not on a short term basis such as three months, but over a year, for us going long, then that's ok. For all the stocks I watch, only a handful have matched Apple's appreciation last year. IBM, and ARM. I own ARM, but not IBM. I did own Amazon, but sold out in November. Too bad I missed the high, but at least I had a decent gain for the year, though not nearly as good as with Apple or ARM.

I understand that a problem is that it's difficult to believe that great yearly growth is still before Apple, and it's true that the law of large numbers will finally catch up with them. But I don't see them moving to a 10% growth for several years.

But as 70% of Apple is already owned by institutional buyers, and they are already fully invested in Apple, for the most part, they can't buy more. The value groups won't buy in because it's TOO high for them, and everyone else doesn't make a long term impression.

So if I get a 25+% return every year, I'm happy. We won't get that in too many other investments where it's pretty secure.

Firstly, AAPL was well on its way to $450+ had the Market reacted rationally after its Earnings Call. This was manipulation and fearfully nonsensical Investor knee-jerk reactions at its best. Apple beat their own guidance, and had the most tangible excuse ever, why? Because the reason that their iPhones came in "less than desired" was because of that NEW PHONE BREAKING RECORDS AND PUTTING PEOPLE IN A FRENZY EXACTLY DURING SAID EARNINGS CALL. This to any logical or remotely intelligent Investor means BUY.

Second, even after the knee-jerk misguided sell-off, the Stock was ready to soar above $410 levels again. Then, after some unsubstantiated "rumors" from no sources whatsoever revealed that "Somebody sneezed in the direction of the iPad, so everybody get reaaaallly scared now", the Stock plummeted down a massive $50 in just a couple of weeks or less, only to bounce back up.

As far as I see it, the iPad has been practically priced out of the Stock by now. How many times does AAPL have to jump down $50 before people realize that the iPad is barely even considered in the Stocks valuation or P/E Ratio?

Reading these Message Boards is a GREAT INSIGHT as to why AAPL is valued like it is. It seems to attract the most fearful and jittery Investors on the Market! This is a company that can shut its doors for a decade and reappear still richer than most everyone else on the NASDAQ! A Company who has a lot to look forward to in 2012 in terms of new Products, not counting any hopefully all-new surprises, etc. etc.

I wish we had AMZN's Investors here! Those guys are nuts!

It's a bit more complex than that. We had, as we have once or twice a year, some unknown analyst from some unknown small company say something that was quickly shown to be wrong. This was the statement that Apple was cutting back on production of iPads, and so sales must be down, rather than up, this quarter. It was pointed out the next day, that Apple is winding up its iPad 2 production, and it ordered more earlier so that iPad 3 production could begin.

But the stock dropped over 10 points. Now, normally it would pop back within a week or so, but the entire market began a long decline on the EU financial problems, and didn't begin to recover until a short time before the new year. So Apple plummeted along with most other stocks. But as the market began to rise again, Apple rose faster, and so ended at 405, a big jump from the 373 or so it had dropped to.

Right now, it's at 418, so we'll see what happens from here. But Apple often undergoes a decline during the winter.

If I was to try and put logic to it then I'd have to guess that investors feel more comfortable with Amazon's business model of selling a lot of items from many different brands compared to Apple's model of selling a few select items all stamped with one brand.

In the stock world I guess you could compare it to buying small amounts of many many different companies in different sectors rather than putting your money into only 5 or 6 companies from one sector.

... but a forward p/e of 89.25 for Amazon compared to 10.77 for Apple... wow, guys... too much faith and not enough faith imo...

That's all I've got...

I think they believe that for a company that sells other's products, the sky is the limit as far as growth potential, and they might be right. Which company had the highest sales in the world? Walmart, and they're still growing.

Of course, both Amazon and Walmart have pretty small profits on a percentage basis. Last year, for Amazon, it was 3.37%, and for Walmart, it was 3.67%. Of course, Walmart doesn't have such a high P/E.

I think they believe that for a company that sells other's products, the sky is the limit as far as growth potential, and they might be right. Which company had the highest sales in the world? Walmart, and they're still growing.

Of course, both Amazon and Walmart have pretty small profits on a percentage basis. Last year, for Amazon, it was 3.37%, and for Walmart, it was 3.67%. Of course, Walmart doesn't have such a high P/E.

... and online sales are increasing exponentially every year with a lot of room for growth.

... and online sales are increasing exponentially every year with a lot of room for growth.

That's true. One advantage of selling other's products is that if one isn't popular, you can always drop it. And while Bezos was wrong about thinking that Amazon didn't need warehouses, they have some of the world's largest, which is a drag on profits. Still, that's much cheaper than having stores. Electronics isn't a very high margin business any more, so that's why BB is in trouble (other than for their own screwups). Apple's business is high margin, but their stores are less so than the actual business of hardware. Still, it does pretty well.

What some financial people don't understand it that for most of Apple's businesses, they are in a small minority of marketshare, so as long as they make very good products, that marketshare will continue to move up. When they create a new market, they have that first product to lead it. Companies that have that have an automatic advantage. But if the product isn't great, others will take over with the second generation. Investors are afraid that will happen to Apple as its happened to so many other companies in the past, including Apple earlier on when the IBM PC came out.

AMZN indeed seems to be like a cult stock. If you read comment sections within Articles that state even negative news on the company, people have an odd enthusiasm. I can only wish AAPL had the same Investors! I see AMZN as a "trap" right now. Already it has been falling and falling since hitting its highs a few months ago, however, there is just so, sooo, sooooo, soooooooo much room for it to fall. We got a taste after its last weak Earnings Call, however, even that wasn't as tragic as AAPL's would have been had they reported anything near as underwhelming. Not to mention, AMZN's hottest product is losing money on every sale, and they have warned of even possibly losing money during the next few or so Quarters....

.... And the P/E is around 100, why?!?! Somebody put some cheese on a string and throw it AMZN's way. Reel it in as they come sniffing. We can use them.

Be careful how you characterize. It wasn't so long ago that AAPL had a PE over 200 and it was in the neighborhood of 50 as recently as four years ago. In fact AAPL's PE was higher than it is today during the big stock market panic of late '08 and early '09.

Well, yes, I do believe it reduces the risk factor. But for Apple that could be a P/E of 20 or even 22. But then, the markets decide this for us. My thoughts are that at this point, as long as Apple outpaces the market, not on a short term basis such as three months, but over a year, for us going long, then that's ok. For all the stocks I watch, only a handful have matched Apple's appreciation last year. IBM, and ARM. I own ARM, but not IBM. I did own Amazon, but sold out in November. Too bad I missed the high, but at least I had a decent gain for the year, though not nearly as good as with Apple or ARM.

I understand that a problem is that it's difficult to believe that great yearly growth is still before Apple, and it's true that the law of large numbers will finally catch up with them. But I don't see them moving to a 10% growth for several years.

But as 70% of Apple is already owned by institutional buyers, and they are already fully invested in Apple, for the most part, they can't buy more. The value groups won't buy in because it's TOO high for them, and everyone else doesn't make a long term impression.

So if I get a 25+% return every year, I'm happy. We won't get that in too many other investments where it's pretty secure.

As you know I've always been a skeptic on the risk factor issue. If you look at AAPL's PE trend, it's been heading steadily lower for about four years. Compare that to the price chart and I don't see a negative correlation between a high PE and high returns. In reality stock price increases pushes up the PE ratio directly so I think in reality we all want a high PE if we'd like to see high rates of returns. It also signals investor optimism, which is good over the longer term. It's only a bad thing if the company fails to deliver, which Apple so far has not. So that's the other side of the valuation coin.

As far as the current or recent returns are concerned, the 25% return in 2011 (which was great considering the market) was predicated on Apple increasing earnings by over twice that much. I don't think we need to be concerned about a growth rate close to 10%, but what effect does 25% earnings growth have on market valuation? That's the question, I think, because we all realistically have to know it's coming sooner or later.

The value buyers will jump in when/if Apple declares a dividend. That changes the value proposition considerably.

What some financial people don't understand it that for most of Apple's businesses, they are in a small minority of marketshare, so as long as they make very good products, that marketshare will continue to move up. When they create a new market, they have that first product to lead it. Companies that have that have an automatic advantage. But if the product isn't great, others will take over with the second generation. Investors are afraid that will happen to Apple as its happened to so many other companies in the past, including Apple earlier on when the IBM PC came out.

Take for example the eeePC which everyone came out with a knockoff product and several vendors like Dell and HP put the weak Atom chips in regular laptops and had significant amounts of the product unsold and returned. Bad product = money pit.

In my opinion, Apple is not going to survive just on iPhones, which is where most of their money is, one of two things are going to happen:
a) People hang on to their iPhones 2-3 years and only replace them when the battery no longer charges (which is roughly close to 365x3 = 1000 charge cycles for LiIon batteries) and opt to replace the phone instead of having the phone battery replaced. This is usually what people do with laptops now. A few will switch from iPhones and a few will replace the battery, but most people stick with their favorite brands as long as they like them.
b) Something better than the iPhone will come out and people will instead migrate to that. Think AR contact lenses or glasses with NI input or something hard to conceive right now because todays electronics consume too much power. I don't think there is anything "better" in the phone form factor that will happen anytime soon unless Apple discovers a way to stretch the screen from an iPhone to an iPad in the same device.

For the next 10 or so years, Apple is going to remain in the lead, but not necessarily have the best device. Meanwhile Samsung might release somewhat better devices, but the batteries will last a quarter of the standby time and you'll have to replace them every year when the next device comes out because they won't upgrade the firmware or replace the battery. This is the problem with mobile phones today, is that if the user got them for "free", the don't appreciate or take care of the device and just get another when they break it. Apple makes a profit regardless of the carrier's subsidy. As far as Apple cares, the carrier can subsidize the device to the tune of 600$. I don't think Samsung makes very much from their phones. Nobody gives a damn about how many phones Samsung shipped, only how much were sold. As stated from other sources Android devices come at the expense of feature phones and RIM (which was blind-sided and put out inferior product just like HP did.)

Or Apple can do something absurd like build the California High Speed Rail project, which will tank the stock, but it's something it could do now (in 2012 dollars) and make money forever on. Good luck on the NIMBYs.

Imagine for a minute what an Apple HSR line would be. It would probably be expensive as a plane trip, but every seat would be business class.

As you know I've always been a skeptic on the risk factor issue. If you look at AAPL's PE trend, it's been heading steadily lower for about four years. Compare that to the price chart and I don't see a negative correlation between a high PE and high returns. In reality stock price increases pushes up the PE ratio directly so I think in reality we all want a high PE if we'd like to see high rates of returns. It also signals investor optimism, which is good over the longer term. It's only a bad thing if the company fails to deliver, which Apple so far has not. So that's the other side of the valuation coin.

As far as the current or recent returns are concerned, the 25% return in 2011 (which was great considering the market) was predicated on Apple increasing earnings by over twice that much. I don't think we need to be concerned about a growth rate close to 10%, but what effect does 25% earnings growth have on market valuation? That's the question, I think, because we all realistically have to know it's coming sooner or later.

The value buyers will jump in when/if Apple declares a dividend. That changes the value proposition considerably.

Well, if Apple could manage to get half the stock price rise as their returns, then that would be pretty good. Even a continued P/E compression would be ok if it didn't happen too rapidly, as long as Apple continued to do well.

I just try to be realistic. So for the longer haul, if Apple could manage a 10% stock price increase with the market lagging that, it would be a winner. That would result in a doubling of the stock in, what, about 7 years (I'm not doing the numbers)?

Well, if Apple could manage to get half the stock price rise as their returns, then that would be pretty good. Even a continued P/E compression would be ok if it didn't happen too rapidly, as long as Apple continued to do well.

I just try to be realistic. So for the longer haul, if Apple could manage a 10% stock price increase with the market lagging that, it would be a winner. That would result in a doubling of the stock in, what, about 7 years (I'm not doing the numbers)?

Or you could be looking at a flatline chart extending over a decade or more, such as with MSFT. I don't pretend to know and I would not try to predict where this is going but the sideways scenario is not without precedent.

Anyhow, I am personally at the point in my life, and my exposure to AAPL has become so great, that I have to be a seller over time. Only a dividend could change my mind.

Or you could be looking at a flatline chart extending over a decade or more, such as with MSFT. I don't pretend to know and I would not try to predict where this is going but the sideways scenario is not without precedent.

Anyhow, I am personally at the point in my life, and my exposure to AAPL has become so great, that I have to be a seller over time. Only a dividend could change my mind.

I don't see the possibility for some time. I won't worry about that yet. My exposure is pretty high as well, but so far, I can leave it.